Wellington, Aug 14 NZPA - The downgrade of South Canterbury Finance's credit rating to junk grade by Standard & Poor's will trigger a review of a $US100 ($NZ149) million private placement facility in the US.

The US investors have the option of requiring South Canterbury Finance to repay the facility.

South Canterbury Finance chief executive Lachie McLeod said South Canterbury had been keeping in contact with the investors, which it normally did.

He confirmed that the rating downgrade triggered a review period of the facility but said the period of the review was confidential.

There are five investors in the facility.

"We will be talking to them and working through it with them," he said.

Mr McLeod said the finance company was disappointed at the timing of the downgrade by S&P yesterday.

The company's credit rating was cut to the non-investment, or junk, grade of BB plus.

An update of the group's announced intention to introduce new capital is likely in the next four weeks.

All debenture holders with deposits of up to $1 million are covered by the Crown deposit guarantee.

Analysts said junk ratings for non-banks would put pressure on the Crown to extend the guarantee past the current guarantee period to October 12, 2010.

Major banks have complained that they bear most of the cost of the guarantee, which they do not need. Only 11 banks in the world are rated AA and four of them are the big Australian banks that operate in New Zealand.

South Canterbury Finance said last month that shareholder Allan Hubbard has injected $40 million of new capital in the business which would have a $58m provision for bad debts in the year to June 30.

Under a legal underwrite agreement Mr Hubbard will stand as security for any further specific loans that could become impaired.

"South Canterbury Finance is a sound, profitable business and I am committed to supporting South Canterbury Finance and its 45,000 investors who have loyally supported the group for 83 years," Mr Hubbard said.

Mr Hubbard, who is 82, was estimated to be worth $550m by the National Business Review Rich List. The Sunday Star Times reported that he is the country's biggest private dairy farm owner but he lives modestly.